Universal Music Group’s Deezer Deal: is the industry ready for change?
By Ellie Crosbie
There can be no doubting the fact that digital streaming has revolutionised the music industry. Services such as Spotify, Tidal, Apple Music, and Soundcloud have transformed the way we consume, produce, and market music by giving fans unrestricted, on-demand access to a musician's discography anywhere, anytime. Free, legal streaming emerged as the industry’s saviour in the early 2000s, amidst a time when pirate sites like Napster and SoulSeek were rising in popularity and CD sales had plummeted. It virtually eradicated the issue of music theft, while breathing new life into the business by diversifying listener preferences and facilitating artist discovery.
With that said, the industry has never fully been able to address the issues surrounding streaming pay-outs, which have long been a source of consternation for both fans and artists as it is rarely the case that musicians are remunerated fairly for their talent. However, things could be about to change forever.
In early September the CEO of Universal Music Group (UMG), Lucian Grainge, struck a deal with French streaming service Deezer to design an ‘artist-centric’ royalty model that hands greater rewards to popular artists. Under current streaming royalty arrangements, every digital recording is paid the same fee, irrespective of the song’s length, quality or the popularity of its artist. Money is pulled by platforms from subscribers, and thereafter distributed based on the recording’s share of listeners. This may sound reasonable in theory, but with the ease at which music can be uploaded and the proliferation of generative AI tools, more audio is being captured and made available than ever in history - a large proportion of which is simply in the form of white noise or “ambient sounds” (think rainfall, crickets, distant traffic, even washing machines!) Recordings like these, devoid of musicianship, rack up around 3 million hours of listens every day according to Spotify. With them frequently receiving higher financial reward than a real artist’s labour of love and skill, the flaws of the system are self-evident.
Under this arrangement, ‘professional artists’ (defined as those whose work draws at least 1000 streams per month and a minimum of 500 unique listeners) will receive a so-called “double boost” to their royalty payments. In other words, streams of their music will be worth twice as much as those from ‘non-professional’ artists. Additionally, songs by professional artists that fans have actively searched for will receive four times the reward than songs by non-professional artists that have been algorithmically served to users. Non-artist noise audio, such as white noise, will also be demonetised in an effort to tackle streamer fraud. The ultimate goal is to create a system that pays more for the songs and artists that listeners are seeking out, which according to the Financial Times is expected by UMG and Deezer to see payment to professional artists increase by around 10%. Deezer launched the new model on 8th November, with the expectation that it will be rolled out to additional markets around the world from next year.
Undeniably, this development is the most ambitious change to music streaming’s economic model since its founding. The shift away from the current pro-rata approach seems almost necessary given the public’s increased awareness of the pitiful amounts that artists receive for streams, which has been a source of backlash for years now. One could argue that any model prioritising active music listening whatsoever is an improvement on the current one.
Despite this, Deezer’s new model clearly has some shortcomings, chief among which is that it isn’t as ‘artist-centric’ as it is being marketed as. One of the streaming industry’s key appeals was its potential to democratise music, with anyone, anywhere able to produce music and upload it online for the world to see. However, as previously mentioned, this has led to a deluge of content, which makes it incredibly challenging for up-and-coming bands and musicians to stand out without the backing of a major label and their marketing. Rather than address this issue, Grainge’s deal compounds it, with small and independent artists now being told they will be paid less than those who have already made it through major groups. For the thousands of artists out there who have yet to make it to UMG’s highly selective “professional” status this is a huge slap in the face, with it already taking more than 800,000 streams a month to equal a wage of $15 an hour. Despite Universal Music Group’s claim that they are “committed to artistry, innovation and entrepreneurship”, it appears that this new deal simply rigs the system in its favour, with UMG’s roster featuring four of the top five global artists on Spotify. As MIDiA’s Mark Mulligan expressed on X (formerly Twitter), Deezer and UMG have effectively proposed “a reverse Robin Hood'' model, “taking income from struggling, emerging artists and sharing it among those who have already found success.”
Additionally, there are some obvious questions when it comes to the model’s expected rollout across the rest of the industry: for instance, how must UMG's major-label competitors be feeling about a model co-designed by Universal taking centre stage? According to the deal, Universal Music Group is also set to collaborate with Deezer on the development of its fraud detection tools, and it will be interesting to see whether rivals will have comparable access to the data generated by these tools. If this isn’t the case, will they embrace the implementation of a system designed without their consultation, or indeed make arrangements of their own?
There are many uncertainties still, as is to be expected from such a ground-breaking agreement that has barely been put into effect. Only with time will we be able to fully understand its implications, but in any case, it can only be seen as an encouraging sign that the industry appears genuinely motivated to find fairer ways to pay musicians. Let’s just hope it pays off.